5% VAT applies to more than you think

Find out about the Government’s temporary VAT cut and how you could potentially benefit.

What is it?

On the 8th July, the government announced that they would temporarily reduce VAT to 5% for certain supplies for hospitality, hotels, and holidays.

This reduced rate started on the 15th July, and continues to the 12th January 2021.

It covers organisations that make supplies of hospitality, hotel and holiday accommodation and admission to certain attractions, and their advisers.

 

What does the cut rate include?

The affected supplies include the following:

  • Food and non-alcoholic drinks sold for on-premises consumption, i.e. in bars and cafes
  • Hot takeaway food and hot takeaway non-alcoholic beverages
  • Sleeping accommodation
  • Admissions to certain attractions including theaters, circuses, zoos and cinemas.

The list might seem short, but it includes lots of different possibilities.

 

What does this mean for me?

The sleeping accommodation includes pitches for tents, and should mean that you can qualify for the reduced VAT rate.

The definition of hotel means that you don’t have to provide food or other facilities in order to qualify, you only need to provide sleeping accommodation to visitors, as long as you do it more than occasionally.

Serviced flats let out as holiday accommodation could also qualify for the 5% rate of VAT.

If you rent a boat out for somebody to sail in then this doesn’t get the reduced rate of VAT, but if the boat has sleeping accommodation and you rent it to them to sleep in then you get the reduced rate of VAT.

For admission to attractions the VAT rate is affected by the main supply not the incidental supply. This means that if you provide a brewery tour then the tour will be the main supply, and food or drink will be incidental, allowing the 5% VAT rate, but only if going on the tour is the main objective.

These wide-ranging definitions mean that it is well worth checking out whether your business is eligible.